Evaluating intangibles and anticipating earnings from loss-making companies are near-impossible tasks. But help is on the way in the form of a publication launched this week that offers institutional investors some guidance in the fast-changing e-world.
Asia eGuide Research Report, produced by investment bank Salomon Smith Barney, reports fortnightly on the internet economy and industry trends. It also tracks the performance of the bankÆs new Asian Internet Index, which covers 36 stocks in the region excluding Japan, Australia and New Zealand.
Pure internet plays that source most of their revenue from internet-related businesses dominate the index. But Pratik Gupta, head of Asia internet equity research at Salomon, says traditional companies that have ôtransformed themselves into internet businessesö are also included. The index leaders are Pacific Century CyberWorks, Sunevision, China.com, Tom.com and Satyam Infoway.
The report's research team believes long-term growth rates and price-earning multiples are now out-moded. "The real challenge of valuing internet stocks," it says, "lies in evaluating the intangibles and anticipating how the early advantages can become self-reinforcing engines of success in the long term."
Salomon suggests investors consider companies with business-oriented applications on the internet because they are ôlikely to generate value earlierö. Infrastructure stocks and market leaders of consumer-oriented companies are also recommended.